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Don't wait until due date to pay

Question:  I’m so confused. Is my car insurance payment due before the due date?  My friend told me that if I wait to pay on the due date listed my policy renewal paperwork it will be considered late and my policy could be canceled. Is this correct?

Answer:  Your friend is correct. If you wait to pay on the due date listed on your policy renewal notice, the payment would be considered a late payment and your policy could be cancelled.

Your expiration date is your due date

When exactly a car insurance policy expires is confusing to most individuals.  With other bills if you run in or call in with a payment on the due date, you’re fine.  Car insurance is different.  The due date is the same day as the expiration date listed on your car insurance renewal notice.

Most people expect the due date to give you a full day of coverage in order to get your payment in, but in reality car insurance policies normally expire at 12:01 a.m. on the due date.  Thus, a minute after midnight your policy could be cancelled for nonpayment.

Car insurance companies should try to make this clear somewhere on the bill for your renewal payment.  For instance, my last car insurance renewal bill has my due date listed as the 10th of the month.  In bold letter above this is a message that clearly states that I need to make my payment before the 10th or the policy will be void due to the insurance expiring at 12:01 a.m. on the 10th.

Car insurance companies could save a lot drivers from being confused -- and paying late -- by making the due date the day before the expiration date.  Until that happens, it’s important to read your full car insurance bill and look for important items, such as the actual date and time the policy expires.

No grace period

Car insurance is also different from other types of bills you may have – like for utilities or even other forms of insurance – that will allow you a grace period and permit you to make a late payment without an interruption in service.  (See “Why there are no grace periods.”)

State laws vary, but most don’t require car insurance companies to offer motorists a grace period to pay their premium.  The expiration date can be the cancellation date if you fail to pay. 

States require you be sent a cancellation notice, but many permit the cancellation notice for nonpayment to be placed on your car insurance bill itself and not mailed on a separate notice.  This means by the time your due date has arrived, the required notice of cancellation has already been given to you by your insurer.

All is not lost, though.

If, up to this point, you’ve been a good customer, your car insurance company may value your business and offer to reinstate your policy -- if you pay within a few days of your due date. 

If reinstatement is allowed, then normally you’d be required to sign a "no loss" form. This would verify that there were no incidents in which claims could be made during the days between your expiration date and reinstatement date.

Best to pay early

With car insurance, it’s best to pay at least a few days in advance of your due date.  This way you can make certain the payment is received and your policy remains in effect.  A late payment, if accepted, can come with late fees.  If a late payment isn't accepted, you may lose your policy -- resulting in an expensive gap in coverage.

Even a small lapse in car insurance can lead to penalties with the state and higher car insurance rates due to your risk now as a driver who lost your policy due to nonpayment and not being continuously covered.

Waiting to pay may also allow you to lose out on discounts.  With your current insurer you could lose out on a renewal discount.

Also, your renewal period is a great time to comparison shop and make certain you’re getting the best car insurance rates available.  If you decide it’s time to switch, you may get car insurance discounts for shopping and buying a certain period of time (usually at least seven days) before your current policy ends.  If you wait until the last minute to shop, you could lose out on this type of discount.

More articles from Penny Gusner

  • State laws
  • Car insurance companies

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